Nisar Spinning Mill has primarily capitalized on job/unit production as its primary method, which has subsequently resulted in a smaller degree of investment for the company allowing the firm to be flexible at the same time regarding its production methods, design and order size. The company believes in paying equal attention to each and every single item that they produce and provide believing in not being differential between their products. Furthermore, the company utilizes a fixed order quantity system, as the management of the company believes that maintain one particular system is not feasible to be used as a tool to be successful in the textile industry while maintaining a separate warehouse for each of their varied production units. The project will focus on the internal and external analysis of Nisar spinning mills. The internal analysis will include the strengths, weaknesses, and a detailed financial analysis of how the company is performing with respect to the industry. The external analysis will include a detailed structure of the opportunities and threats that the company is exposed to.
The ATS group of industries has a new venture by the name of Nisar spinning mill.it is founded by chairman Mian Nisar Elahi in 1968 in Lahore, Pakistan. It is the largest manufacturer of manmade leather and they have excelled in making their product. With their peak quality and innovation they have archived national and international recognition. The products of ATS include i.e. PVC, PU/PVC coated fabric, PU coagulated leather with woven and non-woven backings, PVC transparent film/sheets, vinyl flooring, rigid PVC, PU-coated leather, Vinyl Flex and DOP. The products are manufacture in premium quality using state of the art technology.
There are prone to developed in the fields of operation and market with their commitment to diversification. With this commitment the director of Nisar spinning mill is anticipating annual sales of 1 billion rupees (16 million u$). This is happening all because the company has invested in state of the art technology, the new Reiter plant which went into the operation in January 2007. This all imported machinery has inspired to archive the profits.
Organization and Production
The location of Nisar spinning mill is in the south of Punjab. It is situated 35 km from thokar in the Sundus Industrial estate at the Ijtama Chowk. This firm could be said to be equipped with the most modern ring and compact spinning mill in Pakistan. The firm is occupying a space of 160,000 sq. all the machinery that is operating in the firm was supplied by the Reiter of Swaziland. The total investment that the firm has done is of 1.5 billion rupees (US$ 24 Million). the mill that is operating 24 hours a day,365 days a year, in three shift have secures the jobs of almost 500 blue collar and 100 white collar workers.
Nisar spinning mill specialized on spinning of cotton only .the creation of e 12 to200 can be produced. This range from middle staple to extra-long staple. The average Yarn count is around Ne 32. Nisar spinning mill can produce up to 5000 tons each of ring and compact yarn annually. This includes weaving, knitting and wrap knitting. They have for now installed capacity of 24000 spindles. The prime textile and apparel are made from the fabrics of spinning mill. They are distributing there products in the local market as well as exporting to other international market under their own brand name “Nisar”. The name that is synchronized with compact yarn and high quality yarn. Nisar spinning mill believes in continuous improvement in quality and broadened commitment to product development t. hey are planning to expand into cra and slub yarns in the future, as they gear machinery to facilitate the plant for their expansion. State of the art machinery has been installed to produce only high quality stuff.
The mill has also its own electricity generating plant. As they fall short of electricity that is provided by wapda. The reason why they have chosen o import the machinery from Swaziland is because they want to develop a relationship with the supplier and gain a cooperation partner.
They provide training program to the labor to make them skilled. These programmer are internal as well as external.
“Setting trends globally in the textile industry .responsibly delivering products and services to the our customers”
“To deliver value to our partner through innovative technology and teamwork. Fulfilling our social and environmental responsibility “
Proposed Mission Statement
“To strive in manufacturing of products with uncompromised quality”
The main objective of Nisar Spinning Mills is to carry on the business of manufacture exporting and dealing with the supply relation. Their objective includes state of the art machinery installation in the plant. The firm is committed to diversification this is the reason why as discussed earlier they have invested heavily in the Reiter spinning plant.
The core value of the firm is the quality and quality will not be compromised in any situation. Team work also has a major say in the core value system of the firm. The expertise and attention to detail is looked into very closely. The ERP system control are the too competitor advantage. Each and every spindle is of high quality. The employees are included in the core value system. There is a high reward and promoting employee based of merit and performance. There is a motivating force to development. The compliances with the law of the administration in this industry are looked upon. They are setting bench mark for standard and development in the business.
Corporate governess can be said as the set of rules, regulations and process as the company is directed and eventually controlled. These generally include management, supply and customer etc. etc.
• Proper books of account have been prepared
• Appropriate accounting policies have been applied
• The preparation of
• Accounting estimate are based on reasonable judgment
• The head of director adopted a stable strategy for promotions
• All the local directors of the company are registered as tax payers
• The company has codes of conduct and steps are taken to abide by it
• The meeting of the board are prescribed by the chairman, duration of the meeting are appropriately recorded
As many international uncertainties arises depicting the future economic outlook growth, Pakistan is also affecting due to this international economic background and is currently facing challenges like persistence of high inflation, decrease in private investment and lower Tax to GDP ratio which results in rising total public debt. Considering at the same time, severe energy shortages and volatile security conditions have rendered the domestic economic environment least conductive for production activities.
Spinning has the firm link in Pakistan's textile industry value chain. It is considering that spinning sector is the oldest and most matured one with significant investment in human resources and marketing that connects globally to endure competitive global conditions. It is reported this particular sector has shown advancement in less protected surroundings as compared to China and India.
The literature indicates that major part of good quality yarn produced is exported to other countries rather taking benefits in the form of producing high value added products like fabrics and readymade garments. This is a serious structural weakness of Pakistan's textile industry which results in threatening the whole industry. This yarn is imported by countries who have well flourished textile industries like Japan, Hong Kong and South Korea and they convert into Value added products such as readymade garments and gain much higher prices in international markets. Considering the economy, Pakistan was the greatest sufferer from the quota regime as it had to face high percentage of textile exports restrained because of the quotas imposed by importing countries.
Textile sector remains an integral part of Pakistan's economy as Pakistan has inherent advantage of being fourth largest producer of cotton in the world. Pakistan is ranked 3rd in the field of yarn production. Textile sector consists of value chain activities that starts from cotton picking to the end product that is finished garment. Value chain acts in a way that end product of one sector will be the raw material for other. This creates the value addition to the raw material of particular sector. “Textiles have the longest production chain, with inherent potential for value addition at each stage of processing, from cotton to ginning, spinning, fabric, dyeing and finishing, made-ups and garments.”
“The textiles sector in Pakistan has remained stagnant over the last decade due to a number of exogenous and indigenous factors such as subsidies given to cotton farmers and other textiles products by several countries which distorted prices, marketing constraints, global recession, and increasingly stringent buyer's conditionality “(Pakistan Economic survey, 2014-2015).
Cotton production has remained stagnant at about 13 million bales per annum. On the other hand, the value-added garments sector has grown marginally due to its limited product range, low usage of manmade fibers and inability of manufacturing units to restructure in order to meet changing international requirements.
The main competitors for Nisar Spinning Mills are all the textile Mills that have spinning units, but here we will be conducting an analysis of the following competitors; Nishat Mills, Nisar Spinning Mills, Suraj Cotton Mills and Ruby Textile mills. The major competitor of Nisar Spinning mills being Nishat Mills.
Nishat Textile Mills
Nishat Mills Limited ("the Company") is the most current and biggest vertically coordinated textile Company in Pakistan. The Company initiated its business as an organization firm in 1951 and was joined as a private limited company in 1959. Later it was recorded on the Karachi, Lahore and Islamabad Stock Exchanges on 27 November 1961, 11 March 1989 and 10 August 1992 individually. (Mills N. T., 2015)
The Company's creation offices involve spinning, weaving, printing, coloring, home textile and article of clothing sewing and power era. Overall, the Company has 32 fabricating units each gaining practical experience in a particular item range situated in Faisalabad, Sheikhupura, Ferozewatwan and Lahore. A noteworthy part of the Company's income is export based. Over the years, the Company has accomplished huge geographical broadening in its export deals blend. (Mills N. T., 2015)
The Company has an exceptionally wide base of clients for its items outside Pakistan. It has a long working association with the top brands of the world, for example, J.K.N. Global, Levis, Next, Pincroft Dyeing, Ocean Garments, Gap, Carreman, Tommy Hilfiger, Tommy Bahamas, Crate and Barrel, Laura Ashley, American Living, Chaps, Hugo Boss, Revman and John Lewis. (Mills N. T., 2015)
Nishat Mills Limited is additionally called the lead organization of the Nishat Group. Nishat Group ("the Group") is a main business element in South Asia. Its total assets makes it the biggest business place of Pakistan. The Group has developed from a cotton export house into the chief business gathering of the nation. Exceptionally differentiated, the Group has a vicinity in all the significant parts including Textiles, Cement, Banking, Insurance, Power Generation, Hotel Business, Agriculture, Dairy, Real Estate, Aviation and Paper Products. Showcasing its changed aptitude and keenness in each feature of its operations, the gathering organizations hold the qualification of being among the main players in every division. (Mills N. T., 2015)
Suraj Cotton Mills
Suraj Cotton Mills Limited is a Pakistan-based organization engaged with the textile business. Organization is employed with the assembling and exchanging of Yarn and Woven Fabrics. The Company has three working units situated at Nooriabad, Sind and Shahkot, Punjab. The Company is an assembling association, working, coordinated spinning and weaving yarn in textile industry and its deciding items are sold to worldwide and national clients. The Company works business by two working units; spinning and weaving. Under the spinning portion the organization produces, Carded Yarn, Combed Yarn and Combed Compact Yarn. Under the weaving fragment the Company produces, Bottom wear, Shirting, Pocketing, Home outfitting and Stretch Fabric (lycra). Suraj cotton timely increases the value of its items like expansion of kicking the bucket office home textile assembling. Deals contains more than 80% as export, which spares in tax collection internal cost controls. Textile Industry is an Independent and Self-Reliant industry. (Mills S. C., 2015)
Suraj cotton has attempted leading endeavors in the advancement of new items which has empowered them to rise as business sector leaders, this together with an imaginative and expert administration style has helped them to assemble a solid and monetarily stable base. (Mills S. C., 2015)Accessibility of bottomless raw Material, controls costs and lessens the lead-time over the operation. Accessibility of Low Cost and Skilled Manpower gives them the upper hand. Extensive assortments of cotton fiber are accessible and have a quickly developing engineered fiber industry. Suraj cotton has vast and broadened sections that offer wide assortment of items. With a Growing Economy and Potential Domestic and International Market, Suraj cotton has manufacturing flexibility that increases the profitability. Qualified and gifted administration health working environment produces greige fabric for clothing, sheeting, home outfitting and fancy things in 100% Cotton, Polyester Cotton (PC) and Chief Value Cotton (CVC). Fabric for attire has been consistently taking into account the requests of the export markets and the clothing industry. Suraj cotton has additionally wandered into delivering things like slub yarn fabric and stretch fabric. Suraj cotton now positions among the top notch stretch fabric makers in the national and the worldwide markets. (Mills S. C., 2015)
Ruby Textile Mills
Ruby Textile Mills Limited is situated in Riawind, south of Lahore in Punjab, Pakistan. It was built up in 1991 creating polyester cotton yarn. The second unit was additionally introduced in 2007 with the most recent apparatus setup. Here a standout amongst the most current ring and minimized spinning factory in Pakistan has been assembled. We have introduced world's most recent spinning machines with a venture of 1.5 billion rupees (US$ 24 million). The factory works 24 hour a day, 365 days a year, in three shifts. In the factory, there is an aggregate installed limit of 34032 spindles. Ruby Textile Mills Limited produces up to 10 000 tons each of ring yarn for weaving, sewing and weaving. The yarns delivered are utilized as a part of the making of clothing and home textiles. Ruby Textile Mills Limited offers all the yarn it produces in the nearby and worldwide markets under its own particular image name Lamp-a name synonymous with a high quality ring. (Mills R. T., 2013)
“Ruby textile mills limited is member of renowned group of Pakistan engaged in the business of manufacturing of textile Products, Beverages, Ghee and Oils. Ruby Textile Mills was incorporated in 1980 as Private Limited Company and was subsequently was converted to Public Limited and then listed company.” (Mills R. T., 2013)
Porter Five Forces Model
Strategies in many industries can be developed with the help of Porter five forces analysis.
Porter five forces analysis is all about examining four forces, which keep on remodeling the business environment. These forces are, social political, economic and technological forces. For strategy formulation, strategists strongly consider the present and future impressions of these four forces. Porter's five forces model of competitive analysis is a widely used approach According to Porter, “the nature of competitiveness in a given industry can be viewed as a composite of five forces.”
Rivalry Amnong Existing Competitors
Rivalry between competitors boosts the competition in any given industry. Perfect Competition also reduces the margin of profits in most cases but not in all cases. It contrasts from business to business. Competitors are trying to earn profits by creating the demand of the customers from using some of the strategies such as cost leadership & offering quality cotton fabric.
Using Marketing segmentation and targeting to their target market through advertising their products regularly to raise the responsiveness of consumers and clients. If the market is very big and customer volume is high then profit margin would high it demand's on the market and the customer's volume. So we have analyzed that the rivalry among the competitors in this industry is high because large number of textile mills are producing cotton fabric and offering processing of the cotton fabric.
Threat of Substitute Products or Services
Substitutes effect could impact on the market's situation anytime substitute cotton fabric and other cotton related products like polyester can impact very hard on the market and profit margin and demand of the cotton fabric in given market.
Bargaining Power of Buyers
In Cotton fabric, we see buyer's power is significantly high because customers are concentrated, large, or they are very price elastic because with the change in price customers would shift to other brands. That is reason buyer's power is high. And this is the reason that the customers have substitute brands in the market. Therefore, their bargaining power represents a major force affecting intensity of competition in the in the market of Cotton fabric.
Bargaining Power of the Suplliers
In Cotton fabric market, companies cannot do backward integration because of high setup costs of looms and related processing units. So the power of supplier or raw material like cotton, yarn etc. in this industry is high because with an increase in the raw material prices the textile unit has to pay high price to the supplier and this reason leads to a high power of supplier.
Threat of New Entrants
New entrants in the cotton market anytime could be very effective for the market because it could increases computation among competitors and it can get all the orders of existing companies it could also impact on profit ratio in normal condition the new entrance in the market of cotton and fabric reduce the profit margin of the existing textile mills and processing units. But a new comer in the industry will have to see the entry and exit barriers of the industry, which are rather unfavorable to a new entrant due to high investment as well as due to using an advance technology, with a great disadvantage of the existing competitors. So there are very minute chances of a new competitor in the textile mills industry.
Management operations of Nisar Spinning Mills comprises of the client's necessities and prerequisites. They ought to remember the needs of the clients and the fulfillment of the client while propelling any new item or while making new approach or the methodologies. All their arranging of item, arranging of value and arranging of bundling are on the premise of their client's requirements. That is the explanation behind their prosperity and great name in the business sector.
The organization require new approaches to deal with their workers, the creation of yarn, the evaluating of offers and the request handling for the clients. Taking after are the needs of the administration to better their framework which will actualize new strategies and regulations in time.
Needs of the Management
Advertising office needs to put in complete data of new requests and records division and get this data by utilizing an online based framework for book keeping like occupation expenses, order sheets, etc.
It's essential for Nisar Spinning Mills to surmise its area of expertise on semiannually or yearly basis. They ought to utilize ORACLE or SAP as their money related data framework to look at costs of every branch of the industrial facility and afterward set a financial plan for every division. However, they don't consider project prerequisites when they settle on choice of planning.
HRM office need to utilize an online framework to keep data about each representative of the association (employees) with respect to their compensations, incentives and bonuses, and expected set of responsibilities, and utilize this data when settling on choices about workers for specific jobs.
Directors and managers can utilize ORACLE or SAP based framework that gives them the control to oversee and analyze the inventory in stock, work in procedure and completed merchandise. They simply place data in the software, yet there is no alternative for different offices to update data automatically according to requirements.
The marketing strategy of Nisar Spinning Mills is to reduce their dependence on a few markets, especially Europe and USA, who are the producers of finished goods of yarn. They have developed fancy and special varieties of finishes fabric which are sold at premium prices in the market. They keep on modernizing their equipment in order to maintain high quality of their products.
Free samples are delivered to customers when new product is made, free samples are sent to loyal customers which shows that for this firm, their customers are very important. The satisfaction of the customers is a concern for Nisar Spinning Mills, as it's an important aspect because it gives meaning and purpose to the firm.
Supply Chain Management
The ultimate goal of supply chain management is to meet customer's demand more efficiently by providing the right product, in the right quantity, at the right location, on the right time, and in the right condition and also to reduce lead time & cost of the product. The Request is made by the department or user. As production is made to order, purchase request rises usually when an order arrives. The user prepares the requisition. The requisition is reviewed by the Store and if the item is available in stock they issue if not then they are asked to raise the order for the item to purchase. The requested order is sent to the fiber purchase department to get the rates from the approved suppliers or agents. The purchase order is made and issued to the selected supplier and the supplier sends the items on the agreed time and location according to the contract. The Store update the stock level. The payment summary is made as per the payment terms agreed with the supplier and the cheque is issued for the payment to the supplier after the delivery of requested items.
They purchase a raw material from different sites of the country. The store department checks inventory level through ERP to determine how much raw material is required for production. Nisar's suppliers have no online ordering system that's why they mostly use telecommunication for placing orders. After this production of finished goods take place. After completing the production, finished goods are transferred to store department/warehouse and dispatched to the customer. Complete information of finished goods is available at ERP software and assessable by each department of the organization.
Distribution channel are different for Local and Export orders at Nisar. According to agreed terms, in local market transportation takes place by road and either it is delivered by company or the customer receives it. Payment terms are Line of credit, Advance payment, and credit. For export, delivery is either Cost of Freight paid where Nisar bears all costs of transport or it is Freight paid till board of Nisar i.e. it has to pay only until order arrives at the port. Payment terms for Export are Advance payment, Line of credit or credit. The supply chain process is shown in Appendix.
One important issue is that the company does not have an extranet or an integrated system which could provide easy and convenient access to its customers worldwide and win the company a reputation of reliable global textile exporter.
New Strategy Formulation
Currently the company has the reputation of being a credible and quality conscious. The company has the state of the art machinery. In such a little time they have been able to establish a brand name for themselves. The company has been growing in size in a progressive manner. Company's products being of high quality has increased their demand both locally and internationally. The company was perceiving the risk if the Pak-China economic corridor opens up they would have dumping done by the Chinese. The company's larger proportion of the customers are the Chinese companies. What the company could do is get long term contracts with companies and open up a plant in Baluchistan province of Pakistan. That will help the company to increase their capacity, have steady sales, and also take advantage of the Economic corridor.
The company should increase their capacity as according to Mr. Sanaullah Khan (General Manager Engineering). They have to turn down their customers due to low capacity. The company is also an export oriented company as highlighted in analysis above. They should increase their capacity. For that they can open up a plant in the Gwadar region. That will help the company in several ways such as they will have access to cheap labor, they would also have access to cheap land, the new location will be closer to the new deep sea port (Gwadar port) and the economic corridor that is being opened up between china and Pakistan. The current security situation has also been improved in the region after the military operation. The company could also benefit from the facilities and concessions that the company will may get from opening a plant in Gwadar. Doing this may increase the cost of acquiring the raw materials as they buy cotton grown in Sindh and Punjab. But the company has more to gain then what the company will loose on.
• Nisar Textile Mills can Increase their Capacity, currently their demand of Nisar textile is more than what they can produce.
• They should focus more on their exports. this will not only be in their interest but also in the national interest. As it will improve their profitability and help increase the overall exports of Pakistan
• They should get long-term contacts with their major customers, to reduce the uncertainty of sales. In order to reduce the risk of fluctuations in raw material prices they should use financial instruments such as swaps, option, forwards and futures.
• Nisar Spining Mills should increase their trade with the Chinese
• The company must expand and open new units to improve their capacity and preferably they should plan to open up a plant in Gwadar, as it's a sea port and investing there will ease the trade.
The company should try its best to buy cotton in the second picking because the best quality cotton is grown in the second picking.
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